With MF Global (MFG) recently disclosing more details on its bankruptcy and liquidation, let’s quickly review the financial debacle that came to fruition under former New Jersey governor, former U.S. senator, and former Goldman Sachs chairman, Jon Corzine. Moreover, let’s relate it to the current debacle in Cyprus. There are some quite troubling similarities. MFG was a small commodity broker, a marginal operation by many standards or metrics; then along came Jon Corzine. He was looking for a new opportunity to make more money than he already had—which was substantial to begin with. So he was offered a chance to expand the MFG business model by setting up an in-house, proprietary securities trading operation. More on Forbes [...]
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FINRA is the Financial Industry Regulatory Authority. It touts itself as an independent regulator governing the conduct of all securities firms doing business in the U.S. Given the predatory conduct of the securities industry, it’s obvious that FINRA is falling far short of its mandate. The most insidious role of FINRA is running the mandatory arbitration system that adjudicates disputes between investors and their brokers. Most investors are unaware of the fact that, as a condition to opening a brokerage account, they are required to give up their constitutional right to a jury trial, and agree to submit all disputes to the FINRA-run arbitration system. So far, efforts to abolish this requirement—which is inherently unfair to investors—have been unavailing. The securities industry is a powerful lobby. The last thing they want is a forum where claims against its members will be judged fairly and impartially. More in US News [...] The trustee seeking money for Bernard Madoff’s victims has lost a bid to block an $80 million class action settlement that favors investors in Fairfield Greenwich Group, one of the funds that fed money to Madoff. U.S. District Judge Victor Marrero in Manhattan on Wednesday rejected arguments by the trustee, Irving Picard, who had sought to block the settlement on the grounds that it would deplete funds available to recover for Madoff’s customers. Marrero said the Fairfield investors were not direct customers of Bernard L. Madoff Investment Securities LLC, and as a result were not able to recover funds through a separate lawsuit Picard had filed against Fairfield in 2010. More on Reuters [...] SPOTLIGHT ON LEGISLATION: Congressman Garrett Driving New SIPC Effort in House; NIAP, Stanford Victims Coalition Working Closely In Support Dear NIAP Member – The new year brings with it a new Congress – the 113th. We can only hope that the paralysis that marked the prior Congress will ease and permit bipartisan SIPC legislation to move forward in both the House and Senate. Despite the justifiable and extreme frustration experienced by so many Madoff victims, my feeling is that at no [...] Andrey Hicks, who invented an Ivy League resume and Wall Street credentials to steal $2.3 million from investors for a made-up hedge fund, will spend more than three years in prison, a judge ordered on Tuesday. U.S. Federal Judge Patti Saris sentenced Hicks, 29, who most recently lived in Massachusetts, to serve 40 months in prison and ordered him to pay $2.3 million in restitution. The sentencing ends one of the more brazen hedge fund frauds at a time wealthy investors are still reeling from the fallout of the Bernard Madoff and Allen Stanford investment swindles. Madoff was arrested in 2008 and is serving a 150-year prison term for a Ponzi scheme considered to be the biggest financial fraud in U.S. history, while Stanford is serving a 110-year prison sentence. More on Reuters [...] JPMorgan Chase & Co. has reached a $546 million settlement with the trustee liquidating the failed broker-dealer unit of MF Global Holdings, a court filing showed, an amount that will help repay the brokerage’s customers.As part of a settlement reached with James Giddens, the trustee who is tasked with liquidating MF Global Inc., JPMorgan will pay $100 million that will be made available for distribution to former MF Global customers. JPMorgan will also return more than $29 million of the brokerage’s funds held by the bank, while releasing claims on $417 million that was previously returned to Giddens. Read more in the Chicago Tribune [...] MF Global customers moved one step closer to recouping their missing money late on Tuesday when JPMorgan Chase released its claim to more than $500 million belonging to the bankrupt brokerage firm. The settlement deal, struck between JPMorgan and the trustee overseeing the return of customer money, puts to rest more than a year of tough negotiations. JPMorgan was reluctant to part with the money, arguing in part that it was owed tens of millions of dollars as a creditor of MF Global. More in the New York Times [...] Via Mark Thoma, Hale Stewart is bemused by John Hinderaker of PowerLine. As Stewart notes, Hinderaker begins by asserting that everyone knows that an economic crisis is coming — which apparently means everyone he talks to — then rolls out just about every one of the myths that have been proved wrong again and again by events, from the looming debt crisis to the imminent takeoff of inflation. What Stewart may not know is that this reign of error goes way back — at least to Hinderaker’s ridiculing of yours truly, back in 2005, for suggesting that we had a huge housing bubble that posed an economic threat. He knew that this was nonsense, because the authors of Dow 36,000 said so. It’s actually kind of a nice symmetry: the man who sneered at warnings about a real crisis is now utterly convinced by claims about a fake crisis. More in the New York Times [...] Steven Palladino was such a high roller at Caesars Atlantic City that the casino regularly flew him and his guests down from Boston in a private jet. He purchased real estate and -began building a home with his wife, while buying his mistress gifts and helping pay her rent. But according to prosecutors on Monday, Palladino, 55, was bankrolling his expenses by running a multimillion-dollar Ponzi scheme with his wife, Lori, 52, from the office above his ice cream parlor, iScreamWorks on Centre Street in West Roxbury. The victims: his friends and business associates. Through their company, ¬Viking Financial Group Inc., the West Roxbury couple allegedly said they were a private lending company that borrowed from investors and, in turn, loaned that money out at a higher interest rate. More in the Boston Globe [...] In a huge step forward for R. Allen Stanford’s cheated investors and creditors, a settlement aims to break the logjam over who is entitled to $300 million worth of frozen assets around the world. When Stanford’s Ponzi scheme was exposed in 2009 and his business went under, it spawned a global hunt for his many assets to repay his investors and creditors. But those involved in the search—U.S. government agencies, a U.S.-court appointed receiver and the liquidators of Stanford’s Antiguan bank—fought in courts across the world over who controlled the various assets. More in the Wall Street Journal [...] |
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